Illinois Click-Through Nexus Bill Signed, Bill to Eliminate Provisions Introduced

Illinois Governor Pat Quinn signed a “click-through nexus” bill into legislation on March 10, 2011. The bill will treat some out-of-state sellers as maintaining a place of business in Illinois, making them responsible for collecting use or service use tax on goods or services sold for use in Illinois. Effective July 1, 2011, a retailer or serviceman will be considered to be maintaining a place of business in Illinois for purposes of collecting use or service use tax for one of two reasons. If the retailer or serviceman has a contract with an individual located in Illinois who directly or indirectly refers potential customers to the retailer through a link on their website for a commission or other consideration on the sale of tangible personal property or a service, the retailer will be considered to maintain a place of business in Illinois. The same will apply if the retailer or serviceman has a contract with an individual in Illinois under which the retailer or serviceman sells the same or substantially similar products or services and does so using an identical or substantially similar name, trade name, or trademark. If the retailer or serviceman provides the individual in Illinois a commission or other consideration based on the sale of tangible personal property or a service, they will be considered to maintain a place of business in Illinois and will need to collect use tax on the items or services sold. Under either situation, the retailer or serviceman will be considered an Illinois retailer only if the cumulative gross receipts from sales of tangible personal property or services under the contract exceed $10,000 during the preceding four quarterly periods ending on the last day of March, June, September, and December. The signing of the bill means that Amazon.com would be required to collect sales tax on purchases made by Illinois residents. Amazon has said that it will avoid having to collect and remit sales tax by dropping affiliations with Illinois website companies that direct traffic to Amazon.com. On January 9, 2011, the Illinois Senate introduced a bill that would repeal the expanded nexus definition that the governor just signed into law. This bill for the purposes of use tax and service use tax would expand the definition of an Illinois retailer or serviceman and provide that a website link is not enough to qualify as maintaining a place of business in Illinois. Under this bill, effective July 1, 2011, the definition of a retailer or serviceman maintaining a place of business in Illinois for use tax and service use tax purposes would expand to include any retailer or serviceman having a representative, agent, salesperson, canvasser, independent contractor, or solicitor operating in Illinois for the purpose of selling, delivering, installing, assembling, or taking any orders for tangible personal property. An advertising or affiliate marketing link on a website would not qualify the retailer or serviceman as maintaining a place of business in Illinois for purposes of collecting use tax or service use tax. Based on the signing of P.A. 96-1544, it is uncertain whether this bill will pass and be signed by the governor. For updates to this news item, click here and here. (P.A. 96-1544 (H.B. 3659), Laws 2011, effective March 10, 2011; S.B. 1783, as introduced in the Illinois Senate on January 9, 2011)

UPDATE: Illinois has enacted legislation that repeals the state’s affiliate nexus provisions described in this news item, effective June 28, 2019. For more information, read our updated news item: Illinois Repeals Click-Through and Affiliate Nexus Provisions.

Update: On December 13, 2019, Illinois Gov. J.B. Pritzker signed legislation that re-enacts the state’s click-through nexus and affiliate nexus provisions, effective January 1, 2020. Affected out-of-state retailers will want to monitor their sales into Illinois to determine if they meet the thresholds of the state’s click-through nexus and/or affiliate nexus provisions and are therefore required to register to collect and remit sales tax in Illinois. (P.A. 101-0604 (S.B. 119), Laws 2019)

Posted on March 11, 2011